Spencer Street deal kicks off Melbourne's big year
A prominent office tower in the Melbourne CBD, opposite the Southern Cross station and home to a well-patronised WeWork hub, has found a new owner at about $325 million, the biggest deal so far this year in the city.
Owned by CBRE Investment Management, the sale of the 23-level tower near the corner with Collins Street is expected to usher in a big year for the Melbourne market, where major office transactions have been relatively thin over the past two years.
It’s understood the buyer, now in due diligence, is an Asian-based institutional investor. The proposed deal has been struck on a yield of a little above 5 per cent.
With a floor area of more than 32,000 square metres, the Spencer Street tower is 97.5 per cent leased with an average lease expiry of 6.8 years and an estimated fully let income of $17.75 million.
Formerly the headquarters for Melbourne Water, 120 Spencer Street’s tenants include co-working giant WeWork, CQU Australia and Redhill Education. Built in 1973, the building has recently undergone a $30 million refurbishment.
It has been brokered by Cushman & Wakefield’s Leigh Melbourne, Nick Rathgeber, Josh Cullen and Mark Hansen along with CBRE’s Kiran Pillai and Scott McGlone.
While Sydney has hosted the biggest office deals over last year – such as Blackstone’s move into Grosvenor Tower – the institutional action has been expected to swing to the Melbourne and Brisbane CBDs this year, as investors look for better yields.
After a handful of larger deals in Melbourne’s suburban office markets in recent months, the scene has been set for the central city, where major owners have signalled their willingness to sell.
Among the offerings is a 75 per cent stake in the $2 billion Southern Cross Towers on Bourke Street. In the mid-town area, Sunsuper is looking to exit its interest in 330 Collins Street, 20-level office tower which could fetch $230 million or more.
Farther west on the same street, where it extends into Docklands, 850 Collins Street is up for grabs with expectations of $200 million or more. Its owner is MECGP Asia.
